Transactions related to exchanges still accounted for 89.7% of all Bitcoin activity between January and April of this year, down only slightly from 91.9% for all of last year, Chainalysis found.
The trend could be a troublesome sign for Bitcoin’s longevity. Its anonymous creator, Satoshi Nakamoto, envisioned Bitcoin’s use in everyday transactions, from buying coffee to paying for rental cars. More recently, investors have been emphasizing that Bitcoin has instead morphed into a digital version of gold -- an asset that holds value at times of economic uncertainty, as Bitcoin is uncorrelated to stocks or bonds. That may be wishful thinking, though.
"I’m not expecting Bitcoin to be used in any commerce anytime soon," Kyle Samani, co-founder of Austin, Texas-based crypto hedge fund Multicoin Capital Management, said in an email, adding "that the store of value (AKA digital gold) hypothesis is unlikely to be the ultimate winner on decade+ timescale.” He is still bullish on Bitcoin, Samani said.
Dark net, or illegal, activity has increased, as have peer-to-peer Bitcoin transactions, Chainalysis found.
Efforts to ramp up merchant activity continue. A startup called Flexa recently said it would let people pay using certain cryptocurrencies at merchants like Nordstrom Inc. and Whole Foods Market Inc. Flexa already allows people to spend Bitcoin, Ether, Bitcoin Cash and Gemini dollar at more than 30,000 locations in the U.S.
“Bitcoin is the leader today, and may continue to be the leader due to having the largest network effect and ‘brand,’ but I don’t think Bitcoin itself will ever be ‘money,”’ Jeff Dorman, chief investment officer at Los Angeles-based Arca, said in an email. "Bitcoin doesn’t have to be money to be a success. A lot of great technologies end up being strategically important without living up to their initial road map."
This article was provided by Bloomberg News.